Decoded: How Income From Freelancing Is Taxed

This year, I worked for an employer from April, 2025 to August, 2025. I had a fixed salary. I earned about 5 Lakh as salary. Later, I resigned and started working as a freelancer for software development, where I don't have a fixed salary, but I get paid on an hourly basis. I spent about 1 lakh for the initial set-up for the laptop, etc. I have earned about 5 lakh for the period of September 2025 to March 2026. I work from home whenever I have work assigned by my manager from the US. Which ITR file I have to use for the File Return? What is the maximum deduction I can show to reduce payable tax?

Since you are freelancing, the income received can be taxed as business income. Since you have business income, you have to use ITR 3. As your total taxable income is not likely to exceed 12 lakh, I would advise you to opt for the new tax regime, where you will get a rebate of up to Rs. 60,000/- under section 87A against your tax liability. In case you have any income that is taxable at a flat rate, like long-term capital gains and short-term capital gains on listed shares and equity schemes, the rebate is not available against tax liability on such income.

Against your freelancing income, you can claim all the expenses incurred to earn this income. You can also claim depreciation, as well as repair and maintenance expenses, on the computer.

While calculating STCG tax, shall I include the brokerage amount in the purchase price and selling price of a share? Similarly, in a mutual fund, while calculating STCG, should I include the exit load in the NAV?

Brokerage paid for the purchase is treated as part of the cost. Likewise, brokerage paid for the sale is treated as an expenditure incurred for affecting the sale and is allowable as expenses from the sale price. Yes, the brokerage is part of the cost and can be added to the purchase cost, and can be directly reduced from the sale price for shares bought and sold. Likewise, the exit load levied can also be reduced for the redemption price. These deductions are available against both short-term and long-term capital gains.

I get around Rs 12,000 from my son for normal household expenses incurred by me. Will this money be counted as my income? I don't have any pension, but I do have a few FDs, NCDs, and RDs, and do get a handsome amount as interest. So will the money received from my son be added to this interest income? I am a senior citizen.

The money received from your son can either be treated as a gift from him or as reimbursement for expenses incurred by you. In either of the situations, there are no tax implications for you or your son, as gifts received from children are not treated as income under the income tax laws. You need not even show these receipts in your ITR, whether you show them as gifts or reimbursement of expenses.